Supply Chain

Freight:
Ripe (and Largely Uncharted) Territory to Add to Your Company's Sustainability Map

In a recent review of corporate responsibility reports from major consumer-facing brands, Environmental Defense Fund found that barely half of the companies mentioned the environmental impact of their freight supply chain and the steps they were taking to reduce this impact. This is unfortunate for two reasons: Freight transportation is a major source of corporate-caused climate pollution, and it’s ripe for rapidly achieving significant cost-savings and emissions reductions.

By Jason Mathers | Published 9 years ago | About a 6 minute read

In a recent review of corporate responsibility reports from major consumer-facing brands, Environmental Defense Fund found that barely half of the companies mentioned the environmental impact of their freight supply chain and the steps they were taking to reduce this impact. This is unfortunate for two reasons: Freight transportation is a major source of corporate-caused climate pollution, and it’s ripe for rapidly achieving significant cost-savings and emissions reductions.

Each year, more than 600 million tons of climate pollution in the United States is generated by moving freight. That’s more than the pollution generated by 160 coal-fueled power plants. It’s also greater than the combined footprint created nationwide by powering office equipment and heating, cooling, lighting, and ventilating commercial office space.

Compared to energy consumption in factories, warehouses and offices — all stationary targets — the corporate freight footprint is easier to overlook. The emissions typically occur away from the eyes of sustainability staff, most often generated by assets owned and operated by service providers.

This lack of visibility has led many leading brands to deprioritize logistics or determine that it is not material for their sustainability efforts. It’s time for companies to reconsider this assessment. While they are seldom direct owners of large delivery fleets, consumer-facing companies as a community constitute the largest single user of freight, accounting for nearly 30 percent of all moves. Every business is a consumer of freight services and has both the power and responsibility to improve the climate impact of its industry — using strategies many are referring to as “Green Freight.”

Green Freight Leaders

Among the companies demonstrating the benefits of taking a Green Freight approach is Cummins Inc., which manufactures engines for trucks and other equipment, and has a long, complex supply chain. Cummins has made a deliberate decision to connect logistics and sustainability priorities to actively work together.

“Advances in Cummins engine efficiency has helped improve fuel economy in the overall transportation industry,” said Karen Cecil, Director of Global Environmental Sustainability at Cummins. “We took this a step further and incorporated our own Logistics as one of the top four priorities within the Cummins’ Environmental Sustainability plan.”

Historically, the only way to reduce logistics costs was by pushing on freight rates. Changing that culture can yield powerful results.

“In terms of logistics, if you have a strong focus on sustainability, it will drive efficiencies that give very positive returns,” explained Felix Santana, Director of Global Logistics at Cummins. “Every effort we’ve made has had an impact on our bottom line.”

Cummins put a bead on logistics operations about three years ago, and quickly benchmarked the CO2 emissions from its freight operations so it could track improvements. Then, the company reduced the number of freight service providers from around 50 to less than 10, forming much deeper partnerships with this smaller community of vendors. Working closely with vendors to reduce the company’s carbon footprint has allowed Cummins to make smart moves in terms of consolidating loads, reducing empty truck miles, making the most of intermodal operations (where the long leg of the journey is made on rail), and other easily grasped strategies for making freight more efficient, overall. With this earlier success, Cummins was ready to take the next step on its Green Freight Journey.

This past May, Cummins announced a new sustainability goal for its logistics: to reduce CO2 per kilogram of goods moved by 10 percent by 2020. The goal is focused on inbound shipments and shipments between Cummins’ own facilities. The company expects to save $40-64 million annually as a result of this global effort.

Technology giant Hewlett Packard is in the second year of a program designed to reduce supply chain-related greenhouse gases by 20 percent by 2020 (working from a 2010 baseline). Like many companies that have taken a holistic look at where they’re burning the most fuel and producing the most emissions, HP found some interesting facts.

“If you look at the energy use of our products and the energy used to manufacture these products, those are large numbers that comprise the majority of our company’s GHG emissions,” explained Blair Chikasuye, Global Logistics Environment Manager for HP. “But product transportation is up there, too. It’s a smaller number, sure, but it actually comes in the top five.”

HP started out by looking at existing operations, with a view to emphasizing existing practices that already increased efficiency, and expanding those. “Nine times out of 10, if there’s a cost saving; unless it’s just a straight freight rate reduction, you’re probably reducing CO2,” Chikasuye advises. “So that’s the place to look first — you’re probably already doing it!” He says HP is on schedule to meet its GHG reduction goals.

One of the biggest challenges of commencing the Green Freight journey is defining the baseline from which to measure progress. Chikasuye’s advice is to ask for help.

“You need to work with your logistics providers and your internal organizations to figure out how big a piece of your carbon footprint comes from transportation,” he said. “Then, from that estimation, you can look internally at existing programs and figure out where you can make a difference against your baseline.”

By nature, it’s a tricky exercise in compromise, and it’s important to keep the bigger picture in mind — whatever that initial figure is, you’re looking to improve upon it.

Green Freight Makes Good Environmental and Business Sense

As HP and Cummins are demonstrating, tackling freight emissions makes good business sense. The following articles in this series will dive deeper into specific steps that companies can take today. At the highest level, brands that are not yet targeting green freight improvements will do well to start with a performance-focused effort to reduce fuel consumption and emissions. Those that already are active in this space should set long-term improvement goals. With the urgent need to reduce climate emissions, and the abundant opportunities for win-win outcomes, it’s time to get on board with Green Freight.